Q&A With Social Impact Investing Pioneer Andy Kuper

Tuesday, July 2, 2013

LeapFrog, the private equity firm founded by Andrew Kuper and Jim Roth, raises money to invest in “purpose-driven” businesses—businesses that have a social impact as well as delivering healthy economic returns. The firm’s chosen field is micro-insurance and its first fund, which closed in 2010, is now almost fully invested in companies “up the value chain” of the insurance industry in Asia and Africa.

Last year, LeapFrog’s portfolio companies saw an average revenue increase of almost 25%, while at the same time bringing financial services to 23.7 million people. The European Investment Bank is currently mulling a €20 million investment in a second LeapFrog fund, and although he declined to discuss plans for this new vehicle, Kuper was happy to discuss his experience with impact investing during a recent interview with FINalternatives’ Senior Reporter Mary Campbell.

LeapFrog’s portfolio companies saw an average revenue increase of 24.6% across the board in 2012, did those results surprise you?

It didn’t surprise us, it pleased us, though it might have surprised some others who are used to seeing purpose as something that’s soft and woolly. I’ve been arguing for sometime that there’s a competitive advantage to purpose-driven businesses…in all sorts of respects. Purpose-driven businesses are able to attract better talent because they offer money and meaning instead of just money; they’re able to align the organization more around the shared goals, which we know has powerful effects and reduces friction and all sorts of transaction costs; they’re able to build better brand trust with customers; they’re able to be more resilient.

Interestingly, [Indian financial services company] Shriram CCL, in the face of quite difficult market conditions in India last year, performed very well and outperformed its competitors quite significantly, partly because it’s very aligned and organized and values-driven, and has a relationship with the customers where it could shift its product set.